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Daily Alpha: Porn-Star Pay Advice, Surging Oil Theft, Congress’ Hedge Fund, and Missing Squawk Box

Daily Alpha: Porn-Star Pay Advice, Surging Oil Theft, Congress’ Hedge Fund, and Missing Squawk Box

Garrett Baldwin



Alternative Thinking on Porn-Star Pay Advice…Surging Oil Theft… A Senatorial Candidate’s Risky Hedge Fund Links… Why You Missed Squawk Box… and Active vs. Passive Management...

“2 & 20 is pretty outdated especially when hedge funds are dealing with institutional money. “

Both a former Lazard intern-turned-porn actress and Cliff Asness, co-founder and managing principal of investment firm AQR Capital Management, have something to say to hedge fund managers: “Your fees are too high…”

Here’s Asness speaking with Bloomberg laying out his argument on why hedge funds don’t “hedge” enough and that funds should “lag behind rising markets and outperform when they fall.”

And here’s a Twitter exchange in which porn star Veronica Vain stated that “2 & 20” is an outdated model. (Probably NSFW if you click around too much.)

Now, quick question, which link did you click on first?

“I’ve never seen anything like this before with a member of Congress. I’m not saying it’s never happened, but I’ve never heard of it.”

First it was Hillary Clinton’s rather confounding statements during the Saturday night debate on why she accepts so much money from Wall Street.

But now we’re truly through The Looking Glass any future statement suggesting that the GOP is solely the party of Wall Street. Former Florida Congressman and current Senate candidate Alan Grayson is the subject of a debate over two hedge funds that bore his name and how they are structured.

Some Republicans are arguing that there’s a conflict of interest tied to the structure of his partnerships and the anonymity granted to investors in his fund. Others are concerned about ethics if he wins the Senate race and still maintains some level of control and financial stake in a hedge fund. Plus, there’s the fact that his name is tied to the hedge fund, and Members of Congress are not supposed to use their own names in order to obtain financial gain.

But then there’s the curious case of the fact that one of Grayson’s hedge funds is located in the Cayman Islands… and he has denied that the funds are based there for tax-haven purposes.

“Neither I nor any other investor has ‘taken any advantage’ of the Cayman Islands tax system, as you put it,” Grayson wrote to Politico earlier this year. But that again opens up all sorts of questions about fiduciary responsibility who is investing in his funds, the latter which he does not have to disclose...

When confronted by a reporter earlier this year that he’s keeping $25 million off shore – in places that avoid taxes, he launched into an epic, profanely laced tirade, which you can read here.

Just in case you don’t know who Alan Grayson is – he’s a well-spoken elected public official who has a strong history of bipartisan accomplishments and shows constant respect to his political opponents. Oh, who are we kidding?

Here are a few of his most famous negative sound bites about political rivals...

  • “The Republican healthcare plan for America: Don’t get sick. That’s right, don’t get sick. If you don’t have insurance, don’t get sick If you’re sick, don’t get sick. Republicans have a backup plan in case you get sick. If you get sick, America… die quickly. That’s right. The Republicans want you to die quickly if you get sick.”
  • “I have trouble listening to what [Dick Cheney] says sometimes because of the blood that drips from his mouth when he’s talking.”
  • “They understand that if Barack Obama could somehow bring about world peace they would blame him for destroying the defense industry. In fact, they understand that if Barack Obama has a BLT sandwich tomorrow for lunch, they will try to ban bacon.”

“This is like a drug organization.”

When commodity prices rise, theft is relatively common.

For example, not only have farmers complained that rising grain prices fueled theft from storage facilities, but thieves also have targeted copper irrigation pipes and tractors.

But an interesting story out of Texas, where the yearlong decline in oil prices has fueled rising unemployment and… a consequence of economic desperation: Rising crude sector theft.

The story opens with a surprising anecdote about a thief who has been siphoning off crude 200 barrels at a time and selling it for $10 per barrel two hours from Cotulla, Texas.

Mike Peters, global security manager of Lewis Energy Group, has compared the rising theft of West Texas Intermediate to a drug syndicate.

Crude and machinery theft was a $1 billion industry in 2013, and it’s getting worse.

The rise in crime is also having a significant impact on investor sentiment.

“The most important employment report in history…”

It’s time to introduce a recurring element at the Daily Alpha called:

“Because You Missed Squawk Box…”

In the morning, we try to watch Squawk Box as long as possible.

The goal is to see how far we can make it into the show without changing the channel. This morning, coverage began with a mundane debate on a possible rate hike by the Federal Reserve.

Yep. It only took 15 minutes for them to start “rate chatter” on Tuesday – until Joe Kernan did an impersonation of Malcom McDowell watching “ultra-violence” in A Clockwork Orange and nearly fell off his chair.

Meanwhile, Becky Quick, enthused as a sleepy basset hound, and The Great Andrew Ross Sorkin eyed the coffee machine and hoped for someone to inject them with caffeine while Kernan and their two guests debated whether the size of the rate hike or the symbolic nature of a rate hike itself was more important.

Kernan repeatedly joked that the December jobs report will be the most important jobs report in history – as the Fed weighs its options on policy.

We have to caution Joe. Somewhere, a Squawk Box producer doesn’t realize he’s kidding and has already keyed up the dramatic music to accompany Jim Birdsall’s voice-over script to prepare for their coverage on Dec. 4.

We finally changed the channel at 5:22 a.m. CST after Kernan began reporting on Taco Bell’s recent decision to use cage-free eggs and pondered whether eggs can spawn legs and have been trying to escape said cages…

“The authors of the paper argue that the trend of passive investment has gone too far. It is a meta-trend, that is, a trend that consists of following other trends: but the skilled active manager seeks to get ahead of trends.”

Finally, it appears that November is the ideal month to discuss the debate between active and passive management.

MFS, an active global asset, released an intriguing white paper on active management, what works, what doesn’t, and why active management matters today.

You can check out the whitepaper here.

Meera Hearden issues a nice piece on the risks of passive investing, right here; meanwhile, Patrick Cairns defends the practice – highlighting the “power of passive investing.”

Had these commentators released this white paper just a month ago, they may have been in our most recent issue of Modern Trader: “Active vs. Passive Investing.”

The primary articles will be available on Futuresmag.com this week and at the Alpha Pages.

For now, you can pick up a copy at Barnes & Noble. Inside, you’ll find a breakdown on the conditions of when active managers do beat the market, and learn about the 40 Act funds that are beating the market due to the biggest challenge faced by active managers: Portfolio drag.

Looking forward, we invite writers like Hearden, Cairns, and the team at MFS to contribute their articles at the Alpha Pages as we continue to build this community of alternative investors.

That’s all for today.

Check back tomorrow for more alternative insight on the alternative markets. 















































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